Currency market update: Escalating crude oil prices to drag Indian rupee

On March 3, 2022, the rupee is trading with a positive bias, but escalating crude oil prices and outflows of foreign funds are anticipated to hurt the rupee. Continue reading to learn more.

On Wednesday, the spot USD/INR pair concluded the session at 75.71, up 0.5 per cent. This occurred amid rising crude oil prices and a poorer performance by the Indian stock market. It would have gained even more had the Reserve Bank of India (RBI) not mediated aggressively in USD/INR. India's trade deficit for February 2022 was 21.19 billion dollars, up from 13.12 billion dollars the previous year. The total value of imports and exports was 55.01 billion dollars and 33.8 billion dollars, respectively.

The dollar dropped, reversing earlier gains. This was owing to a rally in US stocks after Federal Reserve Chair Jerome Powell stated that he will be mindful in removing stimulus and that the economy can absorb tighter monetary policy. Furthermore, the EUR/USD pair recovered losses owing to short-covering ahead of the Russia-Ukraine negotiations slated for Thursday.

The USD/INR pair reached the target of its inverted head and shoulder chart pattern exhibited on the lower time frame on March 1, 2022. The pair's March futures formed a Doji candlestick pattern above the upper band of the Bollinger Band. This indicates that the bulls have reached their limit. However, in order to see a turnaround, the price must close below 75.77. Its near-term support and resistance levels are 75.41 and 76.11, respectively.

The Relative Strength Index (RSI) is trending north and is currently hovering at 64.54 demonstrating bullish momentum. The derivative price movements are pointing to a new long position as volume and open interest increase. 

The trading range for the USD/INR pair that investors should keep an eye on is 75.40 to 76.10, however, if the price goes below 75.77, we may see long unwinding.